All that glitters...

TEXT OF INTERVIEW

Tess Vigeland: The stock markets are off to a terrible start this year. For some investors it's so bad, they're turning their attention elsewhere.

Maybe you can hear them right now...

[Clip from "Austin Powers in Goldmember"]: I love gold!

Yes, lots of investors apparently love gold. The price for one ounce of the shiny stuff topped $900 this week. up from just $600 a year ago.

Sounds like a case of gold fever. Here to sift through it all is Peter Morici. He's an economics professor at the University of Maryland:

Vigeland: Hi Peter, thanks for coming in.

Peter Morici: It's nice to be with you.

Vigeland: You know, we hear at times of economic uncertainty about the so-called flight to safety, the flight to gold. Is that what we're seeing right now?

Morici: Absolutely. There's a great deal of uncertainty about the dollar, we have too many dollars abroad because of our large trade deficits and as you know, the New York banks are in a lot of trouble and that is causing a great deal of uncertainty. We've got gold over $900 an ounce which is pretty high. It's not the all-time high in inflation-adjusted terms -- we'd have to get up over $2,100 an ounce to match what we had in 1980.

Vigeland: What actual practical good does it do an investor to hold gold, because you're not actually holding, you know, a cube of bullion. Is it something that does protect you in any way from a downturn in the economy?

Morici: Depends on who you are and where you are. If you're in a country that is not very stable and you have great concerns about the value of its currency or the stability of the government, then holding gold or holding dollars is very useful. For investors in the United States, I find this gold frenzy somewhat troubling. I think they're betting wrong. Over time, the dollar has proven to be a very stable source of value. You can hedge it against inflation with inflation-adjusted bonds issued by the Treasury Department. We've never reneged on our government debt.

Vigeland: So at this point, is gold something that an average investor would want to be holding in their portfolio?

Morici: I don't think this is a good time to buy gold. Gold has been all the way up, it may go a little bit higher, but I would suggest the best place for the average investor to buy today would be the U.S. stock market. The upside potential in stocks is much greater than the upside potential in gold. At the end of the day, if you want to do something with your gold, you have to convert it into dollars. If you want to do something with your stocks, you have to do the same. A year from now, the stocks you buy today will likely yield a better return than the gold you buy today.

Vigeland: Gold isn't the only metal that has been doing quite well -- I know copper has hit some highs, even silver. Are metals something that people should research and take an interest in?

Morici: Well, industrial metals have great utility and they're in much demand because of the growth in China. Much is going on in India as well. They're demanding everything from cement to lumber to steel to copper, so building materials -- and a lot of metals are building materials -- are in great demand. I don't know if I would bet that way because investors have already bid up the prices of those stocks relative to other stocks. Certainly, they will rise in value with the general stock market. For the typical investor, the school teacher listening to Marketplace or the government employee or the college professor, buying the S&P 500, putting your money in a broad, diversified investment like the TIAA-CREF index is really the way to go.

Vigeland: Peter Morici teaches economics at the University of Maryland School of Business. Thank you so much.